Yum! Brands, the parent company of KFC, Taco Bell, and Pizza Hut is acquiring the niche restaurant, Habit Burger for $375 million. The acquisition is poised to take Habit Burger to new heights, far beyond their 300 locations in the United States (company-owned) and China (franchises). Already the largest restaurant company on the planet, Yum! is poised to give Habit Burger access to resources they would be hard-pressed to secure operating alone. Here are some of the ways that Habit Burger with benefit from being acquired by Yum! Brands.
With the right combination of capital and strategy from Yum!, Habit Burger can potentially improve their customer offerings, expand locations, invest in quality personnel and grow their business from a niche operator to an international powerhouse.
Yum! Brands knows the restaurant business. They are the parent company of international brands such as KFC and Taco Bell so they already have the infrastructure to quickly scale Habit Burger from a few hundred locations to thousands. They have the experience, tools and connections necessary to successfully expand Habit Burger globally. Small niche restaurants may have a deep understanding of local markets but once they go beyond that they may be limited. They either don’t have access to accurate information about national and international markets or they can’t afford to hire the people who are experienced enough to pull off expansions. If Habit Burger wants to expand rapidly, they have access to Yum! resources and know-how to make that possible.
Yum! Brands has a track-record of taking brands to difficult markets. Habit Burger will have access to Yum! branding resources that will help them position their marketing messages in the best way for specific locations. Because Yum! has such a deeply resourced marketing system, they can quickly create, test, and deploy marketing campaigns across global markets and get quick and accurate feedback about their effectiveness. This type of strong feedback loop is rare for niche restaurants who are trying to go it alone in the international market.
Right now, most of Habit Burger’s locations are company-owned. Yum! has 49,000 stores in 145 countries which comes with a franchise network with which to partner for expansion. Expansion is already on the table as Habit Burger has announced they plan to expand to 2,000 locations globally. This simply wouldn’t be possible without the Yum! franchise network and their access to credit and financing.
While Habit Burger is small relative to Yum!, the acquisition does offer some long-term growth opportunity for the large restaurant company. This is Yum’s first foray into the burger business and it could offer more opportunities for growth nationally and internationally.
Deepening The Brand
As Yum! continues its global expansion, building its burger franchise brand will deepen its connection to consumers as “burgers” are closely connected to the idea of what is “American.” And the American brand is still very popular globally. Many global consumers want to have a taste of American foods, eating burgers is one popular way to do that.
Good For Investors
Habit Burger is a strong brand. Buying into that strong brand is good businesses for investors who will benefit as Habit Burger expands and increases its customer base.
Potentially Challenging For Franchisees
Yum! franchisees wanting to diversify into hamburger concepts are now probably confined to Habit. Because Habit has so few locations, the opportunity to own multiple locations will only exist if the franchise is willing to invest significant resources and capital to development. This comes at a time when Yum!, like many large brands, is requiring a lot of development from its franchisees.